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Vodafone share price plunged after earnings: buy the dip?

Vodafone (LON: VOD) share price plunged by more than 6% on Tuesday after the company published weak results. It plunged to a low of 97.82p, the lowest level since Friday 28. This drop made it the second worst-performing stock in the FTSE 100 index after Ocado. 

Inflation concerns

Vodafone share price has been in a freefall in the past few months as concerns about inflation and profitability have remained. It has plunged by over 31% from its highest level this year, meaning it is in a deep bear market.

Vodafone published weak results, pushing the management to embark on a cost-cutting process. In the first half of the FY23 year, the company’s revenue rose by 2% to €22.93 billion. Its service revenue jumped to €19.2 billion while its operating profit rose to over €2.9 billion.

Vodafone also announced an interim dividend of 4.5 eurocents per share. Its net debt increased from €44.2 billion to over €45.5 billion. Most importantly, the company’s free cash flow was an outflow of €3.2 billion, higher than the previous €1 billion. 

The biggest challenge facing Vodafone is that inflation remains a major challenge. For example, Turkey now meets the requirements to be designated a hyperinflationary economy considering that prices have jumped by over 85%.

The company also struggled in Germany, which accounts for about 30% of its total earnings. EBITDA in the country plunged by 7.4% to €2.68 billion. As a result, it will now begin a cost-saving measure as it seeks to save €1 billion by 2026.

Vodafone’s earnings came a week after the company announced that it would sell 50% of its mobile phone masts to a private equity group. It is also attempting to merge its UK business with Three, as we wrote in this article. If approved, it will create the biggest telecom operator in the country.

Vodafone share price forecast

The daily chart shows that the VOD stock price has been in a strong bearish trend in the past few days. It has managed to move below the important support level at 97.42p, the lowest level this year. The shares remain below all moving averages while the Relative Strength Index (RSI) has moved below the neutral level.

Therefore, the shares will likely continue falling as sellers target the next key support level at 90p. A move above the resistance level at 97.42p will invalidate the bearish view.

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